TELS Corporation
406 West South Jordan Parkway, Suite 250
South Jordan, Utah 84095
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
To be Held June 2, 1997
To the Shareholders of TELS Corporation,
The Annual Meeting of the Shareholders of TELS Corporation (the
"Company") will be held on June 2, 1997, at 2:00 P.M. MDT time, at 705 East Main
Street, American Fork, Utah 84003 for the following purposes:
1. To elect three directors;
2. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on April 3, 1997
(the "Record Date"), are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Willard H. Gardner, Secretary
South Jordan, Utah
Dated: May 3, 1997
- ------------------------------------
The vote of each shareholder will be important at this meeting. You are
urged to complete and sign the enclosed Proxy and return it in the accompanying
envelope as soon as possible. Such action will not affect your right to vote in
person should you find it possible to attend the meeting.
Requests for additional Proxy Statement, Notice of Annual Meeting and
Annual Report can be obtained from TELS Corporation, 406 West South Jordan
Parkway, Suite 250, South Jordan, Utah 84095.
<PAGE>
TELS Corporation
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held on June 2, 1997
This Proxy Statement is furnished in connection with the solicitation
of Proxies by the Board of Directors of TELS Corporation, a Utah corporation
(the "Company"), to be voted at the Annual Meeting of Shareholders to be held at
TELS Corporation, located at 705 East Main Street, American Fork, Utah 84003
(see enclosed map), on June 2, 1997, at 2:00 P.M. MDT. Certain directors,
officers and employees of the Company may solicit Proxies by telephone,
telegram, mail or personal contact. Arrangements will be made with brokers,
nominees and fiduciaries to send Proxies and proxy materials to their principals
at the Company's expense. All costs incurred in connection with the solicitation
will be borne by the Company. This form of Proxy Statement was first mailed to
Shareholders on May 3, 1997.
THE PROXY
The enclosed Proxy, even though executed and returned, may be revoked
at any time before being voted by written notice mailed or delivered to the
Secretary of the Company, by substitution of a new Proxy bearing a later date,
or by a request for return of the Proxy at the Annual Meeting. The mailing
address of the Company is 406 West South Jordan Parkway, Suite 250, South
Jordan, Utah 84095.
Proxies shall be voted in accordance with the directions of the
shareholders. Unless otherwise directed, Proxies will be voted (1) for the
election of the nominees for director designated by the Board of Directors; and
(2) in the discretion of the persons named in the accompanying Proxy, upon such
other matters as may properly come before the meeting.
INFORMATION ON OUTSTANDING STOCK
On April 3, 1997 (the "Record Date"), the Company had issued and
outstanding 3,891,820 shares of Common Stock, $.02 par value ("Common Stock").
Each share of Common Stock is entitled to one vote. There were no shares of
Preferred Stock issued and outstanding. Only shareholders of record at the close
of business on the Record Date will be entitled to notice of and to vote at the
meeting. The presence at the meeting, in person or by Proxy, of a majority of
the votes evidenced by outstanding shares shall constitute a quorum for the
transaction of business. Individual votes of shareholders are kept private,
except as appropriate to meet legal requirements. Access to Proxies and other
individual shareholder voting records is limited to the Inspector of Election
and certain employees of TELS and its agents. The nominee for director receiving
a plurality of the votes cast at the meeting in person or by proxy shall be
elected. All other matters require for approval the favorable vote of a majority
of shares voted at the meeting in person or by proxy. Under Utah law,
abstentions and broker non-votes will not be treated as votes cast and,
therefore, will have no effect on the outcome of the matters to be voted on at
the meeting.
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the Record Date, the name of each
person who, (i) owns or is known by the Company to own beneficially more than
five percent of the outstanding shares of Common Stock, (ii) is a Named
Executive or (iii) is a Director for the Company of the number of shares owned
by each such person, the number of shares owned by all directors and officers as
a group, and the percentage of the outstanding shares represented thereby.
Shares of Common Percent of
Stock Beneficially Total Voting
Name and Address of Beneficial Owner Owned Shares
- ------------------------------------ ----- ------
Dr. John L. Gunter (1) 554,600 (2) 14%
406 W. South Jordan Parkway, #250
South Jordan, Utah 84095
P. Diane Gunter (1) 196,600 5%
705 East Main Street
American Fork, Utah 84003
Willard H. Gardner 153,250 (2) 4%
1495 Oak Lane
Provo, Utah 84057
David K. Doyle 145,050 (2) 4%
8809 Bell Mountain Drive
Austin, Texas 78730
Stephen M. Nelson 290,000 (2) 8%
406 W. South Jordan Parkway, #250
South Jordan, Utah 84095
R. James Taylor 96,307 (2) 2%
406 W. South Jordan Parkway, #250
South Jordan, UT 84095
Sean Gunter 35,000 (2) 1%
406 W. South Jordan Parkway, #250
South Jordan, Utah 84095
Ming T. Chen 0 0%
406 W. South Jordan Parkway, #250
South Jordan, Utah 84095
All Directors and Officers
as a Group (8 persons) 1,470,807 38%
(1) Dr. and Mrs. Gunter may be deemed to have control of the Company by virtue
of their combined ownership of 17% of the Company's outstanding voting shares.
(2) This column lists voting securities, including stock held by executive
officers and directors, over which they have voting power but no investment
power. Otherwise, each director or officer has sole voting and investment power
over the shares reported, except as noted. This column also includes 95,000
shares for Mr. Gunter; 119,000 shares for Mr. Gardner; 119,000 shares for Mr.
Doyle; 82,000 shares for Mr. Nelson; 87,433 shares for Mr. Taylor; and 31,000
shares for Mr. Sean Gunter which may be acquired by such director pursuant to
stock options that are or will become exercisable within 60 days. Pursuant to
the rules of the Securities and Exchange Commission, shares shown as
"beneficially" owned include (a) shares subject to options exercisable within 60
days of the Record Date, (b) shares held by unincorporated entities and in
trusts and estates over which an individual holds at least shared voting or
investment powers, and (c) shares held in trusts and estates of which at least
10 percent of the beneficial interest of such trust is attributable to specified
persons in the immediate family of the individual(s) involved. This information
is not necessarily indicative of beneficial ownership for any other purpose.
<PAGE>
ELECTION OF DIRECTORS
Three Directors are to be elected at the meeting. The Company's
Articles of Incorporation and By-Laws provide for classification of the Board of
Directors into three classes. Directors are elected at the annual meeting of
shareholders at which their respective class is elected, and they hold office
until the expiration of their terms and until their successors are elected and
qualified. The By-laws of the Company provide that the number of Directors of
the Company shall not be less than three (3) or more than nine (9), as
determined by vote of the Board. The Board has determined the most effective
size of the Board to be five (5), and therefore has determined to present three
individuals for election at the meeting.
Willard H. Gardner and Stephen M. Nelson, if elected, will each serve a
three year term expiring in 2000. Ming-Tzong Chen, if elected, will serve a one
year term expiring in 1998. In the event that the nominee is unable to serve,
the proxies will be voted for a substitute nominee, if any, to be designated by
the Board of Directors, to serve for the term proposed for the nominee which
such substitute would replace. The Board of Directors has no reason to believe
that the nominees will be unavailable. All Directors have served continuously
since first appointed or elected as a Director. Directors are elected by a
plurality of the votes present in person or by proxy and entitled to vote at the
meeting.
Director
Principal Present
Name and Position Age Occupation Since Term Expires
- ----------------- --- ---------- ----- ------------
NOMINEE:
Willard H. Gardner, (1) 71 Retired, Executive Director 1984 1997
Secretary, Director and Information Systems
Chairman of Audit Committee Services, Brigham Young
University
Stephen M. Nelson (2) 48 President and 1991 1997
Director, President and Treasurer
Treasurer
Dr. Ming-Tzong Chen (3) 56 Business Owner, Technology 1995 1997
Director Industry
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE NOMINEES
<PAGE>
INFORMATION RELATING TO DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
Board of Director
Name Age Position with the Company Term Expires
- ---- --- ------------------------- ------------
Dr. John L. Gunter 60 Chairman of the Board, 1999
Chief Executive Officer
Willard H. Gardner 71 Director, Secretary 1997
Chairman Budget-Audit
Committee
David K. Doyle 67 Director, Chairman 1998
Executive Compensation
Committee
Dr. Ming T. Chen 56 Director 1997
Stephen M. Nelson 48 Director, President and 1997
Treasurer
R. James Taylor 38 Vice President,
Chief Technical Officer,
General Manager HTI
and Micromega
Sean M. Gunter 31 General Manager
Tel electronics, inc.
Dr. Gunter, TELS' founder, has been a Director and CEO of the Company
since its organization in February, 1981. He was elected Chairman of the Board
on February 9, 1984. From November, 1980 to February, 1981, he was involved in
activities leading to the organization of the Company. Dr. Gunter received a
B.S. in physics from Marshall University, Huntington, West Virginia, and a
doctorate in physics from Brigham Young University, Provo, Utah. For five years
after completing his doctorate, Dr. Gunter was on the faculty of Rochester
Institute of Technology, Rochester, New York, first as Associate Professor and
Director of Computer Sciences, and later as the Director of Computing Activities
and the Director (Dean) of the College of Computer and Information Sciences and
Technology. Dr. Gunter has been involved in design and/or management of design
activities in the computer field for over thirty years, first as a high school
and college student working as a computer programmer for Union Carbide
Corporation, then as Factory Engineer, Project Design Engineer and Project
Manager from 1959 to 1965 for RCA, EDP Division and for North American Aviation,
Space and Information Systems Division. Dr. Gunter also served as Senior Vice
President for Information Systems with Galbraith and Green, Inc., an insurance
company during 1974 and 1975. He was a political appointee of Governor Calvin
Rampton for almost five years, serving as the Director of Systems, Planning and
Computing for the State of Utah from 1975 to 1979. He served as a private
consultant and as General Manager for Business Communications Systems, Inc.
during 1980.
<PAGE>
Mr. Gardner has been a Director of the Company since September 5, 1984,
and effective January 14, 1989, he took on the additional responsibility of
Corporate Secretary. From 1963 until 1990, he was employed by Brigham Young
University in various capacities including the Executive Director of Information
Systems Services, and he was an Associate Professor of Computer Science from
1980 to 1990. In September of 1990, Mr. Gardner moved into semi-retirement and
has since been involved with several voluntary industry initiatives intended to
expand high-capacity data telecommunications, both nationally and locally. Mr.
Gardner served in the Utah State Legislature from 1973 to 1985. He was a
Founding Member of the Board of Trustees of the Utah Technology Finance
Corporation, served as a member of the Board of State Lands and Forestry, and
was a Founding Member of the Board of Trustees of the Utah Information
Technology Association. Mr. Gardner received a B.S. in physics from Utah State
University and an M.S. in mathematics from Brigham Young University. Mr.
Gardner's technical accomplishments include development of computer programs for
trajectory studies in connection with the ABLE project (first moon shot) in 1958
and of display checkout routines for the APOLLO project in 1962. He also managed
the development of payroll and accounting computer programs at BYU during the
decade of 1960.
Lieutenant General Doyle, U.S. Army Retired, was appointed Director of
the Company on July 21, 1988, and has served as a director continuously since
that time. General Doyle spent over 35 years in service before retiring on June
30, 1986. During his last period of service, he reengineered the Army's
automation and communications services to create a world-wide integrated
information system. Concurrently, he served as the Army's Chief Information
Officer and organized a new corporate staff to establish policy, plan, program
and budget for the Army's tactical command and control and information
management organizations. Since leaving the service, General Doyle co-founded
WELS Research Corporation, a weather information company. He is a Director for
Global Information Systems Technology, Inc., a computer based training and
development company. He has also served on an information system oversight
committee for the National Academy of Science, and has consulted on a wide range
of information issues for both commercial and defense industries.
Dr. Ming-Tzong Chen was appointed a Director in December, 1995, to fill a
vacancy on the Board of Directors. His term of appointment expires on June 3,
1997. Dr. Chen received a doctorate in physics from Brigham Young University,
Provo, Utah. Dr. Chen formed Pro Sports USA, Co. in 1992, to handle the
distribution of Fox Tennis products worldwide. During the last three years, Pro
Sports USA, Co. has produced a patented golf club head design. Currently, Fox
golf and tennis products are distributed throughout the United States, as well
as many European and Asian countries. In 1990, Dr. Chen founded Chateau
Research, Inc., which designs and manufactures top quality loud speaker systems.
In 1978, Dr. Chen founded Chen's International Corp. and Galaxy International
Corp. ("Galaxy"), to handle real estate investments, engage in international
trade and explore other business opportunities. In 1979, under the management of
Dr. Chen, Galaxy obtained a major contract with the Taiwan Power Company, which
resulted in Galaxy becoming the first firm to export coal from the western U.S.
to Taiwan. Galaxy has also been involved in distribution and sales of Digital
Equipment Corporation (DEC) equipment and from 1980 to 1986.
<PAGE>
Mr. Nelson was appointed as a Director in June, 1991, and was elected
to serve a three year term at the June, 1994, annual meeting. He has been
involved with the Company since 1982. From 1982 through 1986, and from 1987 to
1989, he was an outside consultant. From 1986 through 1987 he served as Chief
Financial Officer. In February, 1990, he was appointed Chief Financial Officer,
Treasurer and Vice President, Finance. In 1993 he was appointed Senior Executive
Vice President, in 1994 he became a member of the Office of the President, and
in 1996 he was appointed President and Treasurer. He has been a major force
behind the Company's acquisition initiatives and has been instrumental in
automating the Company's financial systems. Mr. Nelson is a Certified Public
Accountant. He graduated from the University of Utah in 1974 with a B.S. degree
in accounting. Mr. Nelson is a member of the American Institute of Certified
Public Accountants and the Utah Association of Certified Public Accountants and
is also a member of the Institute of Management Accountants. From 1989 through
1990 he served as president of the Institute of Management Accountants. He also
served on the Board of Directors of the American Fork Chamber of Commerce from
January 1992 through 1994.
Mr. Taylor joined the Company as a software programmer on January 13,
1986. In 1987, he was appointed manager of Research and Development. In 1988, he
assumed the additional responsibilities of managing Production and Customer
Service. In September of 1989, he was appointed Vice President of Operations,
and in 1991 he was appointed General Manager of MICROMEGA Corporation. In 1994,
he was appointed Vice President of TELS Corporation and became a member of the
Office of the President. In 1996, he was appointed Executive Vice President and
General Manager of HTI. He has also been a major force behind the Company's
acquisition initiatives and has been instrumental in automating the Company's
production systems. In addition, he was appointed Chief Technology Officer for
the Corporation. Mr. Taylor has been instrumental in the planning and
development of several of the Company's new products. Additionally, Mr. Taylor
has designed and implemented several of the automated processes for the Company
and its subsidiaries. Mr. Taylor graduated from the University of Utah in 1985
with a B.S. degree in Physiological Psychology and was president of Psi Chi, a
national honor society. He was the founder and general manager of a printing
company from 1974 to 1976. He was also the co-founder and general manager of a
computer consulting company from 1980 to 1982. From 1982 to 1985 he was the
manager of Kay-Bee Toys, in Salt Lake City, Utah. From 1985 to 1986 he was the
manager of Follett's College Stores, in Salt Lake City, Utah.
Mr. Sean Gunter joined the Company on August 21, 1989, as a customer
service technician where he gained extensive product knowledge and customer
support experience. Mr. Gunter was appointed as a Sales Representative in June,
1991. Mr. Gunter has served in several sales positions with the Company
including Upgrade Sales Manager in 1992, Installed Base Sales Manager in 1993,
Inner Circle Sales Manager in 1994, and Director of National Accounts in 1995.
He was appointed General Manager of Tel electronics, inc. on February 19, 1996.
Mr. Gunter's experience coordinating the sales program and managing the sales
team efforts for Tel electronics, inc. has been instrumental in the organization
and maintenance of the Company's current revenue levels. He was also selected to
receive the 1996 President's Award.
<PAGE>
In 1996, the Company's Board of Directors held eleven meetings either
in person or by telephone. A majority of directors were in attendance at all of
the meetings. The Board has established two committees, the Budget Audit
Committee, and the Compensation Committee. The members of both committees are
Willard H. Gardner, David K. Doyle, and Ming T. Chen. The principal functions of
the Budget Audit Committee are to recommend engagement of the Company's
independent auditors, to consult with the Company's auditors concerning the
scope of the audit and to review with them the results of their examination, to
approve the services performed by the independent auditors, to review and
approve any material accounting policy changes affecting the Company's operating
results, and to review the Company's financial control procedures and personnel.
The Budget Audit Committee held three meetings in 1996. The Compensation
Committee reviews compensation and benefits for the Company's executives and
administers the grant of stock options under the Company's existing plans. The
Compensation Committee held three meetings during the year. Pursuant to
delegated authority from the Board of Directors, Mr. Nelson as President,
determines all salaries except for the Company's corporate officers.
Employment Contracts, Termination of Employment and Change of Control
Arrangements:
In March, 1994, the Board of Directors authorized a form of employment
contract for Dr. John L. Gunter, CEO, and Mr. Stephen M. Nelson, President and
Treasurer, allowing for base annual compensation of $150,000 and $115,000,
respectively. The contract is for a term of three years beginning on March 1,
1994, automatically renewable on December of each year, unless notice is
properly given by the Company or the executive. The contract allows for a
severance agreement which provides that: (a) if termination occurs for reasons
other than death, disability, or cause, the executive shall receive his
annualized base salary and other benefits, throughout the remaining term of the
agreement, and (b) if termination occurs by the Company or the executive, due to
a change in control, the executive will be entitled to receive an amount equal
to two hundred fifty percent of the amount includable in the gross income of the
executive during the preceding one-year period ending on the executive's
termination date.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Except as disclosed
below, to the Company's knowledge, based solely on information furnished to the
Company and written representations that no other reports were required, during
the last fiscal year all applicable Section 16(a) filing requirements were met.
Mr. Doyle was delinquent in filing Form 4 regarding the receipt of certain
restricted common stock options for 1996.
<PAGE>
REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the aggregate cash compensation paid by
the Company for services rendered during the last three years to the Company's
Chief Executive Officer and to each of the Company's other executive officers
whose annual salary and bonus exceeded $100,000:
Annual Compensation Long Term Compensation
------------------- ----------------------
Securities
Name and Year Other Annual Restricted Underlying
Principal ended Salary Bonus Compensation Stock Awards Option/SARs
Position 12/31 ($) ($) ($) ($) (#)
- -------- ----- --- --- --- --- ---
John L. Gunter 1996 150,330 4,100 18,341 0 0
CEO 1995 150,330 4,165 16,756 0 0
1994 140,297 6,500 16,756 0 0
Stephen M. Nelson 1996 115,253 0 (1) 0 0
President 1995 115,385 0 (1) 0 0
1994 113,558 2,500 (1) 0 0
(1) Amounts are less than $50,000 or ten percent (10%) of compensation.
Amounts for incidental benefits, such as personal use of Company
automobiles, which accrue to certain officers and which, in the opinion
of management, are job-related and appropriate in connection with the
conduct of the Company's business affairs, are included in the above
amounts. Such benefits are not in excess of $50,000 for any individual.
(2) The amounts reflected above do not include indebtedness of John L.
Gunter to the Company in the aggregate amount of $ 73,399. For
information regarding such indebtedness, see Certain Transactions.
The following table provides information with respect to stock options
granted during the Company's last fiscal year to the persons named in the
Summary Compensation Table above:
% of Total
Number of Options
Securities Granted to Exercise or
Underlying Options Employees in Base Price Expiration
Name Granted Fiscal Year ($/sh) Date
- ---- ------- ----------- ------ ----
John L. Gunter None N/A N/A N/A
Stephen M. Nelson None N/A N/A N/A
Aggregated Option/SAR Exercises in Year Ended December 31, 1996, and Option/SAR
Values at December 31, 1996.
The following table features information concerning the exercise of
options and/or SARs during the last fiscal year by persons named in the Summary
Compensation Table, the number of unexercised options and/or SARs held by such
persons at the end of the last fiscal year and the value of such unexercised
options and/or SARs as of such date.
(#) No. of
Securities ($) Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
12/31/96 12/31/96
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ -------------- -------------
John L. Gunter None N/A 100,000 $ 50,000
Stephen M. Nelson None N/A 82,500 $ 41,250
<PAGE>
Compensation of Directors
Effective March 1, 1994, non-employee directors receive a monthly
retainer fee of $800, and $1,400 for each meeting attended in person.
Non-employee directors do not receive fees for telephone meetings. In addition
each non-employee Director is entitled to receive common stock options pursuant
to the annual automatic, non-discretionary grant mechanism under the "TELS
Corporation 1994 outside Directors Stock Option Plan" approved by the
shareholders in June, 1994. On June 3, 1996, each outside director received
5,000 options under the, non-discretionary grant provision of the plan based
upon 1994 year-end results.
STOCK OPTION AND STOCK BONUS PLANS
Executive Stock Bonus Plan
In January, 1984, the Company's Board of Directors adopted the 1984
Executive Stock Bonus Plan (the "Stock Bonus Plan"). The Stock Bonus Plan
provides for the Board of Directors or a committee thereof to grant shares of
the Company's Common Stock, or the right to receive such shares, to officers and
other members of the executive or general management of the Company, excluding
such individuals who hold 10% or more of the Company's Common Stock. Shares or
rights to shares will be granted without other payment therefore, as additional
compensation for services rendered to the Company. The Board of Directors, or a
duly appointed committee thereof, has the power to determine the persons to whom
bonus awards will be made, the number of shares or rights to be granted, and the
terms and conditions under which such grants will be made, including issuance in
installments, forfeiture provisions or other restrictions. The Company has
reserved 537,500 of the authorized but unissued shares of the Company's Common
Stock for grant under the Stock Bonus Plan. The total shares issued and
outstanding under this plan are 537,500 at December 31, 1996. No shares were
issued under this plan in 1996.
TELS Corporation Stock Option and Incentive Plan for Officers and Key Employees
of the Company and Its Subsidiaries
This Plan, approved by shareholders on June 7, 1993, replaced the 1984
Incentive Stock Option and the 1984 Non-Qualified stock Option Plans which
expired. This newer plan permits the granting of incentive stock options,
non-qualified stock options, stock appreciation rights, stock performance
shares, dividend equivalents and restricted stock. The Board of Directors
believes that the Plan will assist TELS in recruiting and retaining outstanding
individuals as officers and members of management by enabling such persons to
participate in the long-term growth of TELS and by providing additional
incentive to increase their efforts in promoting the financial success of the
Company and its subsidiaries. On June 6, 1994, the shareholders voted to
increase the number of shares reserved under this plan to a maximum of 2,000,000
shares of stock that may be made subject to awards, as defined. In 1996, the
Company granted 55,000 options and 2,500 shares under this plan and recorded
compensation expense of $2,275.
TELS Corporation Board of Directors Stock Bonus and Option Plan
On June 6, 1994, the shareholders of the Company approved the Outside
Directors Plan. This Directors Plan provides for the grant of nonstatutory stock
options to non-employee Directors of the Company ("Outside Directors") pursuant
to an automatic, non-discretionary grant mechanism. The primary purposes of the
Director Plan are to enhance the Company's ability to attract and retain the
services of experienced and knowledgeable individuals to serve on the Board of
Directors of the Company (the "Board"), to encourage ownership in the Company by
the Directors of the Company, and to provide the Company's Directors with reward
opportunities based upon the success of the Company. The shareholders have
approved 500,000 shares to be reserved for this plan. In June 1996, each outside
director received 5,000 options under the automatic, non-discretionary grant
provision of the plan.
<PAGE>
Employees' Profit Sharing Plan
The Company adopted an employees' 401-K profit sharing plan, effective
January 1, 1988, covering substantially all employees who have attained age 21
with service in excess of six months. The plan provides for Company
contributions at the discretion of the Board of Directors. Company contributions
begin partial vesting after the first full year in which eligible employees
complete 501 hours of service, with full vesting occurring after seven years.
During the year ended December 31, 1996, the Company contributed $15,000 to the
plan.
Certain Relationships and Related Transactions
At December 31, 1996, Dr. Gunter is indebted to the Company in the amount
of $39,302 plus accrued interest, evidenced by a promissory note dated March 25,
1986, and bearing interest at nine percent (9%), and an employee receivable of
$34,097 for expenses.
APPOINTMENT OF INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. have been recommended by the Audit Committee
of the Board for appointment as the Independent Auditors for the Company for the
year ending December 31, 1997. Neither Coopers & Lybrand L.L.P. nor any of its
members has any financial interest, direct or indirect, in the Company, nor has
Coopers & Lybrand L.L.P. nor any of its members ever been connected with the
Company as promoter, underwriter, voting trustee, director, officer or employee.
It is anticipated that a representative of Coopers & Lybrand L.L.P. will attend
the meeting and shall be available to respond to appropriate questions. It is
not anticipated that the representative from Coopers & Lybrand L.L.P. will make
any statement or presentation. Coopers & Lybrand L.L.P. were the Independent
Auditors for the Company for the year ended December 31, 1996. There have not
been, and there are not any, disagreements with Coopers & Lybrand L.L.P. with
regard to the Company's financial statements or generally accepted auditing
standards.
SHAREHOLDER PROPOSALS
The Proxy and Proxy Statement were first mailed to shareholders on May
3, 1997. Any shareholder desiring to submit a proposal for consideration at the
next Annual Meeting of Shareholders in 1998 should transmit such proposal(s) to
the offices of the Company on or before January 4, 1998.
OTHER MATTERS
The Board of Directors knows of no other matters to be acted upon at
the meeting. However, if any other matter properly comes before the meeting, it
is intended that the persons voting the proxies will vote them in accordance
with their best judgment.
TELS Corporation
Willard H. Gardner, Secretary
<PAGE>
APPENDIX
PROXY CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS of TELS Corporation
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD June 2, 1997
The undersigned hereby appoints John L. Gunter and Willard H. Gardner, and each
of them the attorney and proxy of the undersigned, with full power of
substitution, to vote all of the Common Stock of TELS Corporation which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be held
at TELS Corporation, 705 East Main Street, American Fork, Utah 84003 on June 2,
1997, at 2:00 p.m., MST, and at any time all adjournments thereof with all of
the powers the undersigned would possess if personally present, as follows
below, and on the reverse side:
To vote in accordance with the recommendation of the board of directors, just
sign and date this proxy. No boxes need be checked.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder, unless otherwise directed, the shares
represented by this proxy will be voted (1) for the election of directors
nominated by the Board of Directors, (2) in the discretion of the persons named
in this Proxy, upon such other matters as may properly come before the meeting.
Please sign exactly as name appears in this proxy. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: ,1997 Signature
Signature if held jointly
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
TELS Corporation If you expect to attend the meeting, please
406 W. So. Jordan Pkwy., Ste. 250 check here [ ]
South Jordan, UT 84095
ELECTION OF DIRECTOR(S)
Willard H. Gardner Stephen M. Nelson Ming-Tzong Chen
[ ]FOR the nominee listed [ ]FOR the nominee listed [ ]FOR the nominee listed
[ ]WITHHOLD AUTHORITY [ ]WITHHOLD AUTHORITY [ ]WITHHOLD AUTHORITY
to vote for the to vote for the to vote for the
listed nominee. listed nominee. listed nominee.
